Adopt Resolution #24-147 Approving Right of Re-Entry Agreement, Subordination Agreement and Sale of a Portion of Outlot A, Ramsey Properties Addition; Centra Homes 

The purpose of this case is to consider approval of a revised Right of Re-Entry Agreement inserting the legal description for the newly platted Waterfront Village, a Subordination Agreement subordinating the right to re-enter and take the property back and to update the sales resolution with the updated lot count of 108 and adjusted purchase price. Staff considers the request to amend the Sales Resolution and Right of Re-Entry Agreement a clerical change based on updated information. 

Subordination of the Right of Re-Entry Agreement
The request to subordinate the remedy of re-entering the land in the Right of Re-Entry Agreement to the Mortgage by Bridgewaterbank is a significant change (not a clerical change) to the structure of the deal negotiated with Centra Homes.  The current lending environment is substantially different (higher rates/risk) than when Centra and Bridgewater Bank agreed to all terms of the Right of Re-Entry Agreement for Cottages at the COR in 2018.  Staff has evaluated the request by Bridgewater Bank /Centra Homes and believes that there is not a lot of risk being incurred by the City and that the financial compensation helps mitigate those potential risks.  It should be noted that this request was brought forward by the Bank and the bank is not willing to finance the project unless the subordination agreement is approved.  The City will be collecting at closing all Development Fees outlined in the Development Agreement for Phase 1 totaling (449K), the standard Letter of Credit, Inspections Fees and Sureties, the $256,600 contribution for the construction of West Ramsey Parkway adjacent to site, and the purchase price of $671,112.  The remedy the City has to institute a 20,000 penalty for each lot that does not develop on the schedule outlined in the Right of Re-Entry Agreement remains in place and is NOT subordinated. This remedy would result in the City receiving up to an additional $800,000 (40 lots X $20,000) through the special assessment process if the development isn't on schedule.   Staff anticipates a closing date in late June/Early July of 2024.  The Developer is expected to commence site improvement grading with internal roadways and utilities to follow afterward.  The City is currently working on road construction and utilities for Zeolite Street NW and West Ramsey Parkway NW during the 2024 construction season. Both projects will be coordinated to ensure minimal impact for each party.

Staff believes this is a solid project that will eventually result in an increase of tax base of 34M and annual property taxes of 342K upon completion of the 108 unit development. Phase 1, which is 27 units will result in an annual tax base increase of 8.5M resulting in 86K in new taxes annually.  Staff is amenable to the concession highlighted in the subordination agreement presented for approval based on the minimal level of risk to not perform and the amount of development fees, LOC and purchase price that will be collected at closing.

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A revised Right of Re-Entry Agreement inserting the new legal description and dates of the Purchase Agreement and First Amendment to Purchase Agreement are the only changes to this document. Updating the Sales Resolution from 103 units to 108 units results in a new purchase price of $671,112 which is an increase of $31,070.  Centra will still be responsible for a payment of $256,600 for its portion of construction of the segment of West Ramsey Parkway on the southern boundary of the development at closing.  The Subordination Agreement will simply remove the ability to have the City to re-enter and take back the land but will retain the ability to impose up to an $800,000 penalty ($20,000 for each Certificate of Occupancy not issued per the schedule of the Right of Re-Entry Agreement).

Alternatives:
1) Motion to adopt Resolution #24-147 Approving Right of Re-Entry Agreement, Subordination Agreement and the Sale of Portion of Outlot A, Ramsey Properties Addition; Centra Homes LLC - (as presented); subject to City Attorney Review
2) Motion to adopt Resolution #24-147 Approving Right of Re-Entry Agreement, Subordination Agreement and the Sale of Portion of Outlot A, Ramsey Properties Addition; Centra Homes LLC - (with changes); subject to City Attorney Review
3) Something else

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